The Going Enterprise Paradox: Stability and Instability Under Money Manager Capitalism

Abstract:

This article argues that the business enterprise has evolved through successive stable organizational structures which correspond with instability for those falling outside its aegis. This is shown in the institutional and historical context of both managerial capitalism in the mid-twentieth century as well as the era of financialization that followed. Hence, the framework developed herein elaborates on the ceremonial characteristics of the business enterprise under money manager capitalism, and constitutes a contribution toward an updated going concern theory of the business enterprise.

Keywords::

• money manager capitalism
• managerial capitalism
• financialization
• theory of the firm
• heterodox microeconomics

JEL Classification Codes::

• B52
• D20
• D23
• L20
• P12

Notes

¹ Note that in this formulation the business enterprise need not be the immediate cause of instability; the community may suffer instability simply because feasible solutions are contrary to business interests. This approach may be taken as a generalization of Mayhew’s (2008, chs. 6–7) framework of business management’s efforts to tame supply chain oscillations.

² This view of the concept is consistent with Veblen, who identified the community, not the business enterprise, as the source of production.

³ Additional instances of technological suppression and similar activities can be found in Saunders (2002); see also Stern (1937) for more distant historical examples.

⁴ For an insightful appraisal of this problem from the perspective of business enterprise see London (1932).

⁵ Indeed, manipulation of expectations concerning the going plant and the value of its underlying provisioning processes can occur on the producer side as well. For instance, Dunford (1987, 521) reports that AT&T took measures in the early twentieth century to suppress interest among others in developing technologies they themselves wished to develop and control.

⁶ Consistent with the continued evolution described in the next section, engineering, research, and development have in many industries come to be dominated by a portfolio management conception of intellectual property rights (see, for example, Macdonald 2004).

⁷ The term “non-practicing enterprise” is the author’s own. It was developed as a generic signifier for the third tier of going concern structure within the modern business enterprise discussed in this section, in which the focus of business methods of control and valuation falls primarily on intangible assets, or “market equities.” The term was developed in the context of a study of the evolution of the US software industry and intentionally bears the same acronym as the non-practicing entity, or, colloquially, the patent troll. A thorough explication of the broad applicability of this term is beyond the scope of the present article. But, those interested may look to, for instance, Baranes (2017), Baranes and Hake (2018), and Gagnon (2007) in consideration of the relevance of the theoretical treatment and contemporary importance of intangible assets, as well as to Dean (2015) for the development of the non-practicing enterprise concept within the US software industry.

⁸ To be sure, this was not an efficiency-enhancing trend toward market discipline of large corporations. See, for example, Eichner (1976, 285), who hypothesized that the executives of the large conglomerates were better positioned to allocate capital in terms of a portfolio of enterprises. Likewise, Fligstein’s (2001) analysis of the 100 largest US firms from 1979–1987 found no support for the finance economics hypothesis that a company’s marketto-book value had any correlation to its likelihood of financial reorganization.

⁹ Though the focus of this article is specific to the business enterprise, this proliferation of financial assets clearly extends beyond corporate securities into anything and everything which can generate a revenue stream and be capitalized (see Leyshon and Thrift 2007; Davis 2009).

¹⁰ On the growing involvement of traditionally non-financial firms in financial activities see Krippner 2005; Niggle 1988; Lapavitsas 2011; Orhangazi 2008; Foroohar 2016; Froud et al. 2002 on the auto industry; on retail, Baud and Durand 2011; on Apple Inc., see Lehman and Haslam 2013 and associated papers in that issue). The full nature as well as implications for business enterprises’ stability cannot be examined here, but should be noted as an important line for future study.

¹¹ Source: Board of Governors of the Federal Reserve System, Z.1 Statistical Release

Additional information

Notes on contributors

Erik Dean

Erik Dean is a research scholar at the Binzagr Institute for Sustainable Prosperity and an instructor of economics at Portland Community College. Earlier drafts of this article were presented at the 12th International Post Keynesian Conference in Kansas City, MO, September 2014 and appeared as a working paper for the Binzagr Institute. The author is grateful to Tae-Hee Jo, John Henry, Avi Baranes, the editor, and an anonymous reviewer for this journal for comments on subsequent drafts; as well as to Tony Greiner for assistance with accessing data. Any remaining errors are the author’s own.